US Probes China Dominance in Drones, Polysilicon

New investigations could trigger tariffs, reshape trade talks

The United States has initiated investigations into two key sectors where China commands a significant global advantage: drones and polysilicon. These probes, launched under a powerful trade law, may lead to tariffs and bolster Washington’s negotiating position with Beijing.

National Security Concerns Under Scrutiny

The Bureau of Industry and Security announced Monday that it is gathering public input for an inquiry that began July 1. The investigation utilizes “Section 232” of the Trade Expansion Act, a provision that empowers the president to impose duties if imports are found to threaten national security.

While the official notice does not explicitly name China, it will examine U.S. reliance on imported unmanned aerial systems. This includes drones used for commercial, industrial, and military applications. Polysilicon, a vital material for solar panels and semiconductors, is also a focus, an area where Beijing holds a dominant market share.

“Interested parties are invited to submit written comments, data, analyses or other information pertinent to the investigation.”

Former President Trump previously invoked Section 232 to impose tariffs on steel and aluminum imports, and he had also threatened tariffs on copper based on a similar probe. This suggests a potential for retaliatory measures.

Strategic Leverage or Trade Stumbling Block?

Alfredo Montufar-Helu, a senior advisor based in China for C-suite executives, commented on the potential implications. He stated that he “wouldn’t be surprised” if these investigations were strategically employed to gain leverage in upcoming trade discussions with China.

However, he also issued a word of caution, describing the move as a “double-edged sword.”

The U.S. drone market, for instance, has seen significant growth, with the global market for commercial drones projected to reach $27.9 billion by 2030, according to Statista. China’s DJI currently dominates a substantial portion of this market.

Similarly, China’s share of global polysilicon production capacity is estimated to be over 80 percent, crucial for the renewable energy sector.